FM says India must be more open

NEW DELHI: Finance Minister P. Chidambaram said the government would constantly re-examine foreign direct investment policies with a view to further opening up the economy.

"FDI can work wonders for India. The Indian economy should look to 8 percent and beyond," Chidambaram told the India Economic Summit, a gathering of global business leaders who are exploring business opportunities in one of the world's most rapidly expanding economies.

He said India should take note of Chinas killer instinct in implementing large infrastructure projects. Besides, a couple of other issues like agriculture and services need to be sorted out.

Although India has increasingly allowed foreign direct investment since switching from a socialist-style economy in the early 1990s, many foreign companies still feel further reforms are necessary. There are limits to foreign equity participation in many sectors, and problems with red tape persist.

India has received $4.5 billion in foreign direct investment this year, a fraction of what economic rival China has drawn during the same period, Chidambaram said.

Besides infrastructure bottlenecks, India faces the challenge of providing quality education and health care to most of its people. Here too, foreign money holds the key, he said adding "Indians are heading world class institutions. I ask why Indians can't build world-class institutions in India. This will happen only if we introduce greater competition in the services."

Hinting at expediting financial sector reforms, Chidambaram said Indian banks have to raise huge amounts of additional capital in the region of $11-12 billion of tier in the next five years and grow in size to be able to fund large projects facing financial deficits.